El Salvador

Pursuant to a congressional request, GAO reviewed Military Assistance Program (MAP)-funded construction contracts the Army Corps of Engineers awarded in El Salvador, focusing on the legality, propriety, and effects on U.S. firms of approved offshore procurement waivers, which opened competition to Salvadoran firms.

GAO found that: (1) U.S. firms obtained 5 of 18 Salvadoran construction contracts authorized between fiscal year (FY) 1985 and May 1988, although no U.S. firm has obtained a construction contract since the Defense Security Assistance Agency (DSAA) approved offshore procurement in July 1986; (2) Salvadoran firms were typically able to provide the same services at a lower cost than U.S. firms, whose reasonable, competitive bids included higher costs due to overhead and mobilization and difficulty in obtaining bonding; (3) DSAA lacked written procedures for reviewing or approving offshore procurement waivers or for considering the waivers' impact on labor surplus areas; (4) the Departments of State and the Treasury initially concurred with DSAA regarding the offshore procurement waivers, since MAP funds could be stretched further by permitting local competition; (5) State and Treasury relied on the Department of Defense (DOD) for information about changes in projects' scopes or costs, although DOD lacked a mechanism to inform them of any modifications; (6) the Army complied with procedures and regulations in awarding the contracts to Salvadoran firms; and (7) the Defense Contract Audit Agency (DCAA) had difficulty obtaining relevant documentation regarding Salvadoran contractors and has not conducted any in-country audits of the Salvadoran contracts.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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